Vendors express doubts about new regulation

By Elana Varon

Sep 22, 1996

An initial look at a newly proposed regulation that would expand the use of simplified procedures to some acquisitions of commercial products has some vendors questioning the plan.The proposed rule would carry out a provision of the Federal Acquisition Reform Act (FARA) by letting agencies during a three-year test shorten notice periods and dispense with steps such as formal evaluation plans and negotiations with every bidder.

The regulation would apply to acquisitions between $100 000 and $5 million which in fiscal 1995 accounted for 63 percent of money spent on hardware and software by the government.

The part of the rule in question is a provision that would let contracting officers set a price that vendors would have to meet to win a particular contract. Some industry observers contend this provision is contrary to the government's "best value" philosophy and would result in agencies purchasing products that are low-priced but not necessarily the best quality.

Encouraging `Lowballing'?

Although most vendors have not done a thorough analysis of the rule yet "there is some concern about leveling " said Ella Schiralli director of government relations for the Electronic Industries Association which generally has supported simplification of buying rules for commercial products.

Contracting officers she said would be encouraging "lowballing" of proposals.

"You can say `You must meet this price ' and a vendor can say `I'm not going to meet that price my product is worth more than that ' " said Walter O'Neill vice president of Federal Sources Inc. "Who will offer the low price? People who don't add much value and may have lower quality."

But Ken Salaets director of government relations with the Information Technology Industry Council said that will not necessarily be the case. "It depends how it's conducted " he said. "A lot of contractors will refuse to play in that arena if things deteriorate to that level."

Steven Kelman administrator of the Office of Federal Procurement Policy said it is reasonable for agencies to negotiate more aggressively such tactics are used in the commercial world. He noted that agencies will not be allowed to pit vendors against one another to win other conditions - for example telling a company that unless it offers a two-year warranty with a product it will not be competitive.

Although nearly one-fourth of hardware and software acquisitions would be covered by the rule it is not clear how widely the simplified procedures would be used. O'Neill said the many indefinite-delivery indefinite-quantity contracts and the General Services Administration multiple-award schedules provide easier ways for agencies to make these purchases than issuing a separate solicitation.

Salaets agreed that is possible. "I think initially you're going to see a number of agencies go off and do their own thing " he said but "because of budget reductions staff reductions and the like they will find it simpler to take advantage of existing contract vehicles."